By Rajendra Jadhav
MUMBAI (Reuters) -India’s National Commodity and Derivatives Exchange (NCDEX) will launch sunflower oil futures contracts on Nov. 12 to provide importers with a hedging tool amid volatile prices, a senior exchange official told Reuters on Tuesday.
India is the world’s biggest importer of sunflower oil, fulfilling more than 90% of its demand through imports of 2.5 to 3 million metric tons from Russia, Ukraine, Romania and Bulgaria.
“Imports keep going up every year, and there’s no way for importers to protect themselves. The industry really needs sunflower oil futures to deal with the volatility in global prices,” Arun Raste, managing director of NCDEX, told Reuters.
The exchange would initially launch three monthly contracts with a delivery option at Chennai in the southern state of Tamil Nadu, he said.
Sunflower oil, which typically commands a premium over rival palm oil and soybean oil, is preferred in southern states.
Sunflower oil contracts could attract a high level of industry participation as importers currently don’t have an option to hedge risks in other edible oils, said Sandeep Bajoria, president of the International Sunflower Oil Association.
India last month extended the suspension of trading in derivative contracts of soybean, soybean oil and crude palm oil for the second time to run into late 2024, as the world’s largest importer of vegetable oils seeks to curb food inflation.
The south Asian country meets nearly two thirds of its edible oil requirements through imports, which cost a record $20.8 billion in the 2022/23 financial year ended on March 31.
Vegetable oil prices have become very volatile in the last two years due to geopolitical tensions and sudden export curbs imposed by leading producing countries, making hedging a necessity for importers, Bajoria said.
The landed cost of imported sunflower oil in India jumped to a record $2,300 per ton in May 2022 from around $1,400 in January 2022 after supplies from the Black Sea region were disrupted by Russia’s invasion of Ukraine.
In 2023, heavy selling by Russia and Ukraine brought prices down to as low as $850, making it cheaper than palm oil and soybean oil.
(Reporting by Rajendra JadhavEditing by Mark Potter)